Though the CARES Act is packed with provisions for small businesses (including emergency government grants and existing loan payment coverage), the $350 billion Paycheck Protection Program (PPP) might be the most promising portion of the legislation. With its low interest rate and forgiveness potential, the Paycheck Protection Program aims to sustain small businesses through this pandemic without burdening them with significant debt to pay off when the crisis has passed—and, in the process, its goal is to keep people in their jobs and stem the tide of unemployment nationwide.

The rollout of the program hit many bumps along the way, and the original funding allotment rapidly ran dry. Now, Congress has passed another $310 billion round of funding late on Thursday, April 24 (TechCrunch). We don’t yet know when the Small Business Association will reopen applications. But given how quickly the original funding dried up, if you want to access this resource to support your business, you will be ready to apply as soon as the loan application itself opens.

Let’s dive into what information we have right now so that you can be ready to get the ball rolling for your business if and when the time comes.

Please note: We are not legal experts. If you have specific questions about your business or loan application, please speak with your attorney and/or bank for clarification.

What is the Paycheck Protection Program?

The Paycheck Protection Program isa Small Business Association (SBA) loan program specifically designed tohelp small businesses continue to make payroll at their staff’s current pay rate, as well as cover key expenses that keep the lights on (think rent and utilities). Any loan funds used for these express purposes during the loan’s eight-week period will be eligible to be forgiven: in other words, if a small business uses the loan as it’s intended, they will likely not have to pay back a penny.

By driving cash into threatened small businesses, the Paycheck Protection Program directly addresses what 70% of small businesses cite as their primary business challenge: cash flow management (Forbes). About half of small businesses don’t have enough cash on-hand to survive more than 27 days without incoming revenue, and about 25% can only make it 13 days or less with no revenue (JP Morgan). With a PPP loan to cover about two months’ worth of most costly expenses (payroll and rent), small businesses will be able to stretch out their existing cash reserves much longer. Hopefully long enough for this crisis to end and for businesses to re-open.

In the meantime, with this loan, small businesses should be able to hold onto their existing team, preserve their retail or office space, and maintain their current utilities providers. This can provide small business owners and employees the opportunity to collaborate to find a way to pivot the business to find alternate revenue sources during COVID-19; and once the crisis ends, small business will still have their fully-trained team on-hand to ramp back up to their usual business model and capacity.

If laying off all your employees is like taking the wheels off a bike so it can no longer run, think of the PPP as enabling small businesses to put on training wheels. You can keep going, though perhaps not as quickly. If you hit a bump, you might not fall totally over. But the most important thing is that you keep moving.

How can the Paycheck Protection Program help your small business?

Now that we’ve covered the goals and potential impact of this program, let’s take a closer look at the details. I’ll answer common questions that small business owners likely have about the PPP, including how to determine if you’re eligible, how to apply, how the PPP compares to SBA’s EIDL loans, and more.

How do I know if I’m eligible?

You should be eligible to apply if:

You’re a small business, 501(c)(3) nonprofit, or a 501(c)(19) Veterans Organization based in the United States.

You have fewer than 500 employees.

You’re self-employed or a sole priorietor.

Your business has been adversely impacted by COVID-19, and the current uncertainty makes it difficult to run your business.

You need this loan to keep your business afloat.

Your business was fully operational on February 15, 2020, with employees on payroll.

If you’re a sole proprietor or are self-employed (e.g., you run your own one-person marketing agency):Although you don’t have payroll costs in the same way, the loan amount you’re eligible for is still calculated based on your payroll costs for the past 12 months; you full loan amount may be up to $100,000 (the maximum amount small businesses are allowed to claim as payroll costs per employee). See the “What counts as payroll costs” section of this US Treasury resource for more details. Note: This information is up to date as of 4/1/20. We will update this section as more details for sole proprietors and self-employed individuals are clarified. If you have questions, we recommend speaking to an attorney.

What is the loan period?

The loan period lasts for eight weeks from the date of origination (the date the borrower officially receives the loan). Interest payments will be deferred for 6 months. The loan will be due in 2 years, and there’s no penalty for pre-paying (US Treasury).

What can I use the loan money for?

The loan is designed to help keep businesses running and people employed. Based on the latest guidance from the SBA, you should plan to use at least 75% of the loan monies to pay your staff’s salaries during the eight-week loan period, if you plan to apply for loan forgiveness. If you’ve had to lay people off, their pay will not be included in the calculation of the loan amount. But if you hire them back after submitting your application, we believe you can use your loan monies to pay them. If you lay off additional employees after applying for the loan, or if you decrease your employees’ pay, the amount you will be eligible to have forgiven will be impacted.

The remainder of the loan amount (up to 25%) can be used on:

Rent

Interest on their mortgage principle

Utility payments

If you stick to the above expenses (75% for payroll, no more than 25% for rent, mortgage interest, or utilities), you should be able to have 100% of their loan forgiven (updated 4/3). Learn more details from the SBA here.

If you’ve already taken out an EIDL due to COVID-19 related challenges, you may be able to refinance your existing loan as a PPP loan (Foley).

How can I apply?

You will need to gather the required documentation, complete your PPP loan application (download the final application form here), and apply via an SBA-approved institution (find one here), ideally your business’ existing bank. See more info from the US Treasury and the SBA (updated 4/3).

When can I apply for a Paycheck Protection Plan loan?

Updated 4/24: We don’t know when applications will re-open, once the new round of funding is signed into law, but the money will definitely go quickly. Potential applicants will want to contact their bank right away to begin this process if they haven’t yet. See this the US Treasury for more details.

When will I get my Paycheck Protection Plan loan amount, if my application is approved?

Updated 4/24: We don’t know yet. We’ll update this as we find more information. Based on the first round of funding, the time it takes to receive funds may vary—some businesses in the first round received their loan monies quickly, while others experienced delays.

Where can I get more information?

You can find the full text of the CARES Act here. Here are more resources:

What if I have more questions?

More details about this program are being released by the minute, so we may not have answered all your questions! We will be updating this article with updates as we see them, but please be sure to be on the lookout for relevant updates as well. I'll also be hosting a live Q&A On Monday, May 25. If you have questions specific to your business or your loan application, do speak to your attorney and/or bank.

Elaine Stone

As a product marketer here at WordStream, Elaine helps launch new products that empower small businesses to grow. Outside of the office, she might be found exploring the great outdoors, taking dance classes with her husband, or tracking down the best live jazz in Boston.